The Z3 was developed from the E36 platform of the 3 Series. The resulting platform is sometimes referred to as the E36/7(roadster) or E36/8(coupé). The rear semi-trailing arm suspension from the E30 was used rather than the more sophisticated multilink suspension from the E36. At first, only the 1.9L M44B19 straight-4 engine was offered, but its 138hp (103kW) was not up to buyers' expectations. Interior appointments too were not up to the standard of other BMW models, and the plastic rear window looked poor compared to the glass unit found on the much less expensive 1999 Mazda MX5.
In the North American market, the inline-4 engine was complemented by a larger straight-6 engine in 1997: the 2.8L M52B28. This engine, similar to the BMW M52 in the 328i except with an all aluminum block and head, was especially desirable with its 189hp (141kW). The M Roadster (see below) appeared in 1998 with a 3.2L S52B32 (North America) or more powerful S50B32 (International) I6, just as the four was retired. In 1999, the 1.9 L 4-cylinder engine was replaced with a 2.5L straight-6 M52TUB25, producing 170hp (130kW). Due to marketing, BMW wanted to differentiate the 2.8L engine from the 2.5L engine, so it was badged it 2.3 just like the 3-Series 323i, which also has a 2.5L engine.
Outside of North America, the 1.9L 4-cylinder was replaced with a 2.0L straight-6 in 1999.
All of the engines were replaced when the car was freshened for 2001. The range consisted of the 2.2L M54B22 (available outside of North America), 2.5L M54B25, 3.0L M54B30, and (for the M Roadster) 3.2L S54B32. All three of these straight-6 engines lasted through the end of the car's run in 2002. Also updated was the car's interior appointments, though the plastic window remained.
The Z3 proved quite reliable, with problems limited to bad oxygen sensors, a flimsy plastic water pump, and failing rear shock mounts. Recently problems with tearing of the differential mounting ears have been reported. With time the most common problems were rocking seats and water leaks on the roof. With its popular retro styling, the Z3s have held their value fairly well in the resale market.